Octubre 2011· Newsletter

Manzanares Abogados · Lawyers
www.manzanares-es.com

Spanish Government cut VAT to 4% Spanish Government cut VAT to 4%

on the purchase of new-built properties until the end of the year

Spanish government approved a decree-law in August stating the VAT changes from 8% to 4% on the purchase of new-built properties. This measure is in place until the end of the year. From January 2012, it will be 8% again.

 

This measure aims to reduce the stock of properties, as the Spanish government spokesman and Minister of Public Works, José Blanco, and Vice President for Economic Affairs, Elena Salgado, have explained.

 

This will mean that for a property of about 200.000 €, the price will be reduced by about 8.000 €, half of what is currently paid in VAT, according to what Mr. Blanco detailed, who has stressed that this is a "temporary and extraordinary” measure.

 

“With this measure we intend to sell the property stock and revive the construction sector, where there is potential demand, but it is very difficult to have access to credit due to the stock” said Mr. Blanco.

 

Mrs. Salgado was asked about the tax collection impact these VAT cuts will have, and she said that it is "predictably positive" because it will expedite the purchase of properties, an indicator that now is not its best moment.

 

To that end, the Minister of Public Works pointed out that both developers and financial institutions asked for exceptional measures in order to release part of the property stock and to open the tap of credit.

 

This decree-law approved today also includes changes in Corporation Tax for companies whose turnover exceeds 20 million Euro (0,5% of all companies that pay taxes for this, approximately 3.900) and measures to reduce pharmaceutical costs, which will favour a "structural" saving of  2.400 million Euro annually for the State and for the autonomous regions.